Here come the carbon taxes. And there they go again. Can’t anybody here play this game?
For some time an outfit called the Ecofiscal Commission has tried to offer the conservative solution to climate change. Frankly I believe that solution has to begin with the science, or rather with skepticism about what alarmist non-scientists tell us the science is saying. (For instance the Climate Discussion Nexus newsletter and videos including our latest on the 10th anniversary of Climategate erupting.) But the trouble with challenging the left’s premises is it makes you seem uncool. Or something.
Anyway, for whatever reason, the Ecofiscal people decided they believed in man-made global warming, or climate change, or climate emergency or whatever it’s now called. And then they brought level-headed conservative economics to the panic.
At least to some extent. Their final report explained why carbon taxes are probably the best way to reduce human emissions of gasses containing carbon, “best” here meaning the largest reduction in emissions at the lowest overall cost. And the explanation included the important point that while it is actually possible to imagine a regulatory regime that would work almost as well in theory, we know that regulatory regimes are rarely ideal.
They are too complex, too subject to fiddling, and too prone to regulatory capture. Whereas a carbon tax on every unit of carbon emitted is clear, simple and it’s suspicious if anyone starts messing with it. For instance reducing the burden on large emitters who lobby you. Just saying.
Still, so far so good. And then the Ecofiscal Commission went on to say that the current feeble carbon tax would have to rise rapidly, to $210/tonne by 2030, for Canada to meet its Paris Accord obligations.
Now if I may just circle back to the science for a moment, because it really is fundamental, the most important difficulty with this proposal is that the alarmists’ own computer models say meeting the Paris targets won’t stop runaway warming. So why would you sacrifice anything at all to meet them?
Paris has this weirdly iconic status on the left as an emblem of our willingness to do something even though it’s not actually something. And you’d expect the Ecofiscal Commission to avoid that kind of thinking. But back to economics.
No wait. On to politics. As you know, defenders of a carbon tax including the incumbent Liberal federal administration have insisted that it’s not a revenue grab, just intelligent neoliberal use of pricing to influence behaviour. And to prove it, and avoid being voted out of office, they’ve promised to rebate all the money.
Now back to economics, where this promise is very awkward especially given the very low price elasticity of demand for gasoline, natural gas, diesel and so on. If the price of apples rises, you can buy oranges. But if the price of plane tickets goes up, you’ll be waiting a long time for the next dirigible. As for “steamships” versus sail or, awkwardly, airplanes, Greta Thunberg could tell you a tale. And how are goods going to get to store shelves, or people to work outside the most compact of modern urban neighbourhoods, if they can’t drive?
Because of this problem, if you raise the price of gas, people are liable to cut back in other areas to afford it anyway, making all carbon taxes problematic. Even worse, if you raise the price of gas but hand back all the money, guess what they’ll spend it on? Right. Either gas or the stuff they cut out to keep buying gas. So their budget ends up right back where it started and you’ve achieved nothing
For these even a carbon tax without rebates is unlikely to achieve its intended effect except at enormous cost (and remember, the real cost of more expensive gas is the things we don’t have because of it). And a carbon tax with rebates? Phooey. The money comes out of one pocket, into the pump, down to Ottawa, back to you and right into the same pocket. Achieving nothing. (The commission’s claim that redistributive rebates would be even more cost-effective than “per-capita” ones also fails to impress for reasons that will have to wait for another day. But surely it wasn’t thrown in just as a political sweetener.)
Since the Ecofiscals are good economists, regardless of their ability to see through some very suspicious pseudo-science, they should realize that a carbon tax can’t work. If you don’t want people using gas, you’re going to have to ban it, offer a truly cost-effective alternative, or both.
I can see why you would hesitate to give that advice to politicians, especially if you placed a very high premium on being perceived as reputable and worth listening to. But encouraging them to do something futile in the face of a supposedly urgent crisis is not responsible even, or perhaps especially, if made to sound responsible.
Forget carbon taxes. Built nuclear reactors. Subsidize batteries. Ban gasoline. Anything but carbon taxes. Why, you might even question the “settled science”. Because if not, you’re going to find yourself making sensible proposals that are pretty silly.
John Robson is Executive Director of the Climate Discussion Nexus.